Direct engagement model of introduction
Published 31 May 2023
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We have been carefully considering the direct engagement model and how the Employment Agencies Act 1973 and The Conduct of Employment Agencies and Employment Businesses Regulations 2003 may apply to their use in the recruitment sector.
Direct engagement is a model of introduction that is typically found in the healthcare sector and allows NHS Trusts to make savings by engaging contracted workers directly (particularly in respect to the payment of VAT). The agency supplies workers (such as doctors and nurses) to be directly engaged either on short or long term bookings and paid by an NHS Trust. The relevant Trust might pay the workers directly or through a third party but not the employment agency who introduced the worker to that Trust. The agency will in most cases charge the Trust a commission fee based on the number of hours that the worker is paid in a week, for as long as the work-seeker is engaged by the Trusts.
In our opinion, in the majority of direct engagement models, the recruitment agency is operating as an employment agency for a short-term placement with the hirer rather than as an employment business. We have not seen an example in the market where the recruitment agency could be said to be operating as an employment business in the direct engagement model. There is nothing in the above legislation that sets out that an employment agency must receive a one-off payment for introducing a work-seeker to a hirer. We will, however, review each direct engagement case carefully on a case-by-case basis.
The issues we have seen recently involve agencies presenting themselves as an employment business using the direct engagement model to the work-seeker and hirer. The paperwork given to the work-seeker in these cases was inaccurate and confusing on the basis that the agency is acting as an ‘employment agency’ but the paperwork indicates an ‘employment business’ relationship.
Another issue is that some hirers have not been issuing contracts to work-seekers under direct engagement models which may leave them in breach of employment law and leaves the worker in a confused position, unsure who they are actually employed/engaged by. Some hirers are also using external bodies to pay the work-seeker, who may or may not be similar to an umbrella company or outsourced HR function.
Agencies should be aware of Regulation 8 which prohibits employment agencies from handling or arranging handling of work-seekers’ pay. In our view, inputting timesheets and providing work-seeker’s bank account details direct to the hirer’s pay portal, or third party vendor, would breach Reg 8(1)(b). If the employment agency handles a work-seeker’s wages it would be a breach of Reg 8(1)(a).
If you have any questions regarding direct engagement, please do not hesitate to get in touch.
Employment Agency Standards (EAS) Inspectorate
Email: eas@beis.gov.uk
Telephone: 0207 215 4477